California Is Getting Serious About Distributed Generation

California has had a bit of a contradictory approach to wholesale distributed generation, with policymakers saying all the right things but not doing what was needed to promote it. It looks like the future is promising for this niche, however, as reality catches up with the rhetoric.

There are generally three niches for renewable energy in California: behind-the-meter rooftop solar (and some small wind); utility-scale projects 20 megawatts and above; and wholesale distributed generation between 1 and 20 megawatts.

California is breaking national records in the first and second niches. California’s net-metered solar has generally been the biggest in the nation for many years, losing the crown just once at the height of New Jersey’s solar program. California now has about 2,400 megawatts of net-metered solar installed since 2005, at an average cost of $5.44/watt.

The utility-scale renewables market dwarfs this amount, however, at 10,338 megawatts installed since 2003 and another 4,000 megawatts expected by the end of 2016.

The laggard, however, is the wholesale distributed generation (WDG) market. Only a few hundred megawatts of WDG have been installed so far. But we can expect this number to increase quite a bit in the coming years. With Governor Brown’s new push on renewables, it’s likely that WDG will finally see strong growth.

A key advantage for WDG is the much lower cost of interconnection when compared to utility-scale renewable energy projects. So even though the cost of generation can sometimes be a little higher for WDG when compared to bigger projects, the lower cost of interconnection and transmission lines for WDG will often result in net savings. Policymakers have long recognized this fact, but programs haven’t always reflected this major benefit.

Expected WDG under existing programs

There are three main programs now for WDG in California: the ReMAT program for projects 3 megawatts and below; the RAM program for projects of 3 megawatts to 20 megawatts; and the new kid on the block, the Green Tariff Shared Renewables program, for projects up to 20 megawatts.

Between now and 2020, we can expect about 200 megawatts to be procured and built as part of ReMAT, an additional 275 megawatts as part of the new and improved RAM program, and 600 megawatts as part of the Green Tariff Shared Renewables program (which will be procured using the ReMAT and RAM programs and contracts). This gives a total of about 1,100 megawatts of new contracts to be issued under these programs before 2020, on top of about 2,000 megawatts of contracts already issued under these programs and their predecessors.

The Southern California Edison Local Capacity Requirements program is another potential source for WDG contracts. SCE must procure 800 megawatts of “preferred resources” by 2020 under this program, which includes energy efficiency, demand response and energy storage. No WDG contracts were awarded in the first round of this program, however, since SCE chose to focus on energy storage and behind-the-meter solar. It is nevertheless likely that SCE will procure at least some WDG under this program too.

The biopower market is about to get a nice boost with the beginning of the long-awaited SB 1122 program. This bill created an extension of the ReMAT program that is applicable only to biopower projects like dairy gas or forestry waste biomass. It adds 250 megawatts to the ReMAT program, essentially doubling the size of that program.

Once these projects are built, the total WDG capacity by 2020 will be 3,100 megawatts to 3,500 megawatts. This is a solid sum when compared to other states, and California is clearly on top of the heap in the U.S. But when we compare California to other similar-sized jurisdictions around the world, we can see much room for improvement.

An interesting new market for WDG has grown due to the rise of community choice aggregation (CCA). Marin County has led the way in implementing this new utility model, which allows cities or counties to take control of the power-generation options for their constituents but leave the billing, distribution and transmission of power with the private utility.

Marin is expanding its territory by adding neighboring cities and counties to its program. Sonoma County has a similar effort up and running, and, in exciting news in my own backyard, the County of Santa Barbara’s Board of Supervisors voted in early June to fund a feasibility study to examine the merits of community choice. Our hope is that this effort will include various cities in our region and will lead to the creation of a robust regional aggregator with a strong focus on expanding renewable energy.

All of these CCA efforts are motivated at least in part by a desire to exceed the state RPS requirements, which means that they’ll all be buying or building significant amounts of WDG and other renewables to meet their needs. Marin and Sonoma County already have modest feed-in tariff programs, and my hope is that these programs will be beefed up over time. My best guess (admittedly complete speculation) is that the CCA WDG market will be about 200 megawatts by 2020.

The country’s largest public utility, the Los Angeles Department of Water & Power, has its own feed-in tariff program exclusively for solar projects. Recent efforts by the Los Angeles powers that be are seeking to double the size of this program to a total of 300 megawatts. While promising, not many solar projects have been built yet under the program. Time will tell whether the program’s issues are fixed.

The existing and new CCA efforts, plus feed-in tariff programs from public utilities, may add another few hundred megawatts to the state’s WDG market by 2020.

Brown’s new policy support for WDG

Gov. Brown made a headlines earlier this year with his strong support in his State of the State speech calling for a 50 percent RPS by 2040, as well as a 50 percent reduction in carbon emissions from vehicles and 50 percent more efficient buildings. He also called for an increase in distributed generation, stating that we need “more distributed power, expanded rooftop solar, microgrids, an energy imbalance market, battery storage, the full integration of information technology and electrical distribution, and millions of electric and low-carbon vehicles.”

The governor’s goals are not yet law, so they are not binding on utilities at this point. One bill has already been proposed to make the governor’s new goals binding. SB 350 (De Leon) is pending in the Senate and it has a strong shot at passing into law. Unfortunately, SB 350 does not contain any carve-out for WDG. Rather, it simply sets higher RPS requirements for 2025, 2027, and 2030, at 40 percent, 45 percent and 50 percent, respectively.

The main action, then, on WDG will remain with existing WDG programs as well as with the ongoing AB 327 Distribution Resources Plan process at the California Public Utilities Commission (CPUC). It is possible that future bills will create new carve-outs for WDG.

As part of the AB 327 process, my client, the Community Environmental Council, has proposed a new “click-and-claim” process that would allow WDG developers to use online maps developed by the private utilities to find favorable locations for WDG and literally click a button to initiate the process for obtaining a contract and interconnection authorization. We’ve been in dialogue with the utilities on these new ideas, and some exciting progress is being made.

The first AB 327 plans are due from the utilities by July 1, so we’ll find out fairly soon how ambitious the utilities are going to be on this first iteration of the plans. The CPUC has already required the utilities to commit to a long-term AB 327 process, so these first plans will be just one of a number of updates submitted in the coming years. While these plans won’t include any procurement authorizations, our expectation is that by streamlining the interconnection and procurement processes, the CPUC will agree that new WDG procurement authorization is warranted.

In conclusion, the prospects look good for wholesale distributed generation in California, despite the challenges. While California is doing well compared to its peers in the U.S., other countries of similar size have shown that we can do more. Given the governor’s and the legislature’s push to increase renewables goals to 50 percent by 2030, we can expect a renewed focus on renewables in all market niches.

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Tam Hunt is a lawyer and writer, owner of the renewable energy consulting company Community Renewable Solutions LLC, and author of the upcoming book The Solar Singularity: Why Our Energy Future Is So Bright.